As consumers face higher prices, NRG buys GenOn

NRG Energy, already one of the biggest generators in Texas, plans to buy Houston-based GenOn Energy for $1.7 billion. This will create the nation’s biggest independent power producer, ushering in “a new era of scale, scope, and market and fuel diversification in the competitive power industry,” NRG President and chief executive David Crane said in a release announcing the deal.

That doesn’t mean it will do anything to keep the lights on Texas. For much of the summer, the state’s utility regulators have been desperately trying to create incentives to boost generation. They raised the limits on wholesale power prices by 50 percent and want to double them again next year. That, apparently, still didn’t create enough potential profit for generators like NRG to expand their capacity. So, the Public Utility Commission, as I wrote in Sunday’s column, approved a special plan by which NRG can tell in advance whether it will get in trouble for market manipulation.

None of this, though, is encouraging generating companies to invest in new generation. Instead, they’re spending their capital to further concentrate their market power, which is likely to result in even more sway over already-pliable PUC.

Meanwhile, the higher price caps are expected to increase price volatility in the wholesale market, making it more expensive for companies to hedge. That’s likely to drive many smaller retailers out of business. Epcot Electric, for example, recently was bought by YEP Energy, and others may follow. The result: fewer choices for consumers.

If there’s one upshot to the whole NRG-GenOn deal, it’s that at least we’ll have one less silly name in the electricity business. To NRG’s credit, it didn’t try to change the name of the combined company to GeNRG. Still, that’s little comfort to consumers who are seeing deregulation playing out this summer in the form of less consumer choice, questionable reliability and the potential for higher prices.